Why can the market value of stablecoins reach ten trillion U.S. dollars in the future?

Author: rektdiomedes

Source: rektdiomedes twitter

Currently, the total market capitalization of stablecoins is around $153.2 billion. Although the stable currency field has experienced many twists and turns this year, the mainstream stable currency is still standing, and the entire encryption market is regaining confidence. Twitter user rektdiomedes believes that the market value of stablecoins will reach $10 trillion in the future, and listed ten reasons.

Stablecoins are technologically superior to traditional banking channels

As someone who has run an online business using both traditional financial platforms and on-chain stablecoins, I can attest that the latter is undeniably 100x better.

If you want to do an international transaction through Bank of America or Wells Fargo or similar, you will be charged very high exchange rate fees.

If you want to use PayPal or Payoneer or Wise, you can theoretically avoid such fees/charges, however...you definitely can't avoid the massive human cost of a phone call with their support team as the funds you transfer will inevitably It is frozen or lost due to various reasons.

It's not their fault either, it's the Byzantine and anachronistic TradFi system they're forced to deal with.

With stablecoins, you can send USDC or DAI on multiple blockchains for less than a penny, and confirm the transaction through Etherscan or DeBank. Moreover, no matter how much money you transfer, the whole process is 100% transparent.

Stablecoins have very obvious value to people like the people of Argentina who experience currency debasement

Imagine you live in a country whose currency is rapidly devaluing, you can only get dollars through expensive gray market transactions, and holding large amounts of physical cash can be dangerous.

In this context, the utility of permissionless, self-custodial stablecoins denominated in more stable currencies or assets is clear.

Reliable remittance and transfer channels in emerging markets

International remittance transfers are costly for many migrant workers around the world, and in many emerging markets, remittance channels are inefficient and corrupt.

The governments of these emerging markets have failed to provide a monetary system that serves the interests of users.

On-chain stablecoins are not just a better monetary system, but a better legal system. People in developing countries don't have reliable laws. The rich and powerful often delay supplier payments and infringe intellectual property rights. Ethereum, on the other hand, provides reliable laws on a global scale to anyone with an internet connection. All it needs is a scalable currency that is censorship-resistant, decentralized, immutable, and stable.

Stablecoins fulfill all of these conditions in the interests of users.

The ultra-high efficiency of the foreign exchange market on the chain

Additionally, the technology behind on-chain stablecoins is far superior in every way to TradFi channels. It's still early days, but the former will inevitably swallow the latter.

Currency hedging for ordinary people

Likewise, the ability to have a stablecoin pegged to USD/Gold/CHF is invaluable if you live in a place where currencies are devalued.

Young people who receive USDC salaries in Europe are the best representatives.

Ability of Stablecoins to Provide Yield to Holders

As mentioned above, you can earn (real, organic) income with stablecoins.

So far, this has mostly taken the form of liquidity provisioning (you earn income by providing liquidity to a decentralized online exchange/forex market).

The “yield” comes from this, but it also comes from the fact that on-chain DeFi is 100x more efficient than TradFi.

On-chain protocols can be done with just a few developers, while TradeFi institutions require thousands of employees to maintain their systems.

Therefore, all these savings can be passed on to liquidity providers and token holders as yield.

There's also the possibility of a dollar-type stablecoin that would pass on the proceeds of holdings of treasury bills to holders, among a variety of other interesting possibilities.

As a measure against banking black swans

If you know history, you know that bad things like the Cyprus bail-out and all these other things tend to happen to us humans time and time again.

In 2013, depositors at two banks in Cyprus had their deposits confiscated to protect the country's banking system, a process known as a "bail-in". The move was made conditional by international creditors for a 10 billion euro ($11.62 billion) bailout of the eastern Mediterranean island nation.

Although the stablecoin business is a bit complicated for novices, even so, the significance of keeping some liquid funds in a wallet that only you can access is obvious.

Protection against personal black swans

The threat of wrongful arrest/prosecution/blackmail/freezing of bank accounts is a real black swan on a personal level for many people around the world.

Again, this is complicated. This perhaps speaks to the value of cryptocurrencies and stablecoins. Holding your own stablecoins and wallet private keys is more reliable than putting your money in a bank that may freeze your account.

As an Advanced Monetary Tool for Institutions

Just as online businesses and young adults are increasingly using on-chain stablecoins, traditional institutions will increasingly adopt them.

Examples include complex institution-focused protocols like Maple Finance, and MakerDAO that use real-world assets as collateral for the stablecoin DAI.

As a logical outgrowth of the existing Eurodollar system

"Eurodollar" refers to U.S. dollars deposited in banks outside the United States that are not regulated by the U.S. Federal Reserve System. As a result, these dollars are less regulated than dollars in the United States and have a lot of flexibility. Such U.S. dollars first appeared in some European banks, and later such U.S. dollars in other non-European banks were also customarily called Eurodollars, although they had nothing to do with Europe.

CDP stablecoins such as DAI, FRAX, and MAI are essentially Eurodollars (i.e. USD-denominated loan/collateral/trade units that exist outside the official US system). The emergence of the US dollar stable currency, just like the emergence of the Eurodollar system, has created more US dollar instruments, and it is possible that any sovereign currency is more sought after.